The interview below is part of a series from McGuireWoods that features interviews with impressive independent sponsors as part of our ongoing commitment to the independent sponsor community. To recommend an independent sponsor for a future interview, email Jon Finger at email@example.com.
Q: Why did you decide to become an independent sponsor?
Mike Robertson: I am passionate about technology investing. What I have always loved about my 10-plus years of Silicon Valley private equity investing has been meeting ambitious technology entrepreneurs and providing the resources that empower them to solve tough business problems, such as how software can be used by everyday businesses to win the war for talent.
I've always loved the independent sponsor investing model. At the time I launched SageLink Capital, I had two sets of experience: over a decade of technology private equity investing and being the chief executive officer (CEO) and chairman of a software-as-a-service (SaaS) business. The sets of overlapping experiences set me up well to succeed as an independent sponsor because I was able to seamlessly move from discerning investor, alongside my capital providers, to helpful operator, alongside portfolio company management. I had always worked with middle market companies and had a large pipeline of relationships to draw from.
I also saw positive market trends for emerging technology investors, like SageLink Capital, to grow the "missing middle" in technology investing: those technology firms too mature/low-growth for venture capital, too subscale for mega fund "Silicon Valley" investors and too middle-America — based in the mountains, Midwest and South — for a coastal focus. I believed SageLink could leverage the independent sponsor capital markets to empower these underserved and unsuitably served technology entrepreneurs.
Q: How long have you been operating as an independent sponsor and how long did it take to close your first deal?
MR: SageLink launched in mid-2018. We closed our first deal within the first 10 months of launching. We've since closed two more deals.
Q: What are some of the most impactful reasons you think the independent sponsor model has grown so robustly and what changes do you envision for the future?
MR: We are in the midst of a huge transfer of value in the lower middle market as baby boomers are selling their businesses. This is occurring at a time when more traditional private equity is going upmarket with larger funds directed toward larger businesses. As a category, independent sponsors have had time to build track records of strong investment returns. Family offices, endowments, pension funds and other capital sources are shifting more of their asset allocation to private direct deals, particularly as more businesses remain private during the most attractive phases of their value growth curves. In addition, the process to source and diligence any one direct deal is beyond the capacity of the various capital sources investment team,particularly when the deals are in a specialized industry, such as software or technology.
Independent sponsors bring access and expertise to these types of direct deals. The independent sponsor model, being deal by deal, allows a greater alignment of economic interests and more refined discretion in capital allocation than the traditional limited partners/general partners relationship with a traditional private equity firm.
I would also say that, from a portfolio management standpoint, independent sponsors have a penchant for rolling up their sleeves in supporting portfolio company management teams in executing the investment plan, which is likewise a positive trend in value creation and aligning interests.
Q: What are the most common misperceptions about the independent sponsor model?
MR: Independent sponsors are fairly well-known and the benefits of working with us have been established. However, sometimes we get grouped in with general private equity. To some sellers, that may come with certain biases, positive and negative. Independent sponsors don't operate by a playbook, but take a tailored approach to each seller's specific situation. We can meet a seller in the middle with creativity and flexibility.
As with any buyer, we strive to ensure that we get the financial terms of a transaction right. However, it's our empathic attention to and accommodation of the varied and diverse nonfinancial considerations of sellers that make us stand out. At SageLink, we deeply care about honoring the seller’s operating history, its future, its founder's legacy, its employee base and its culture.
Q: Recognizing every deal is different, what are some of the most important considerations for you when choosing a capital partner for a deal?
MR: The most important consideration is the alignment of belief in equity value creation. If there's a deal that is revenue growth-oriented and the prospect capital partner is grounded in high profit/value orientation, then there is going to be a schism in executing an effective investment plan. The capital partner should understand our thesis, plan and strategy.
For example, SageLink is executing on an aggressive rollup plan with one of its portfolio companies, and our capital partners were well-aligned behind the strategy from the beginning and have been very supportive since. It's been a good example of how to work well with capital partners and align investment philosophies and objectives. It's a nice benefit when the capital partner has some experience in the industry or can leverage its network for the benefit of the prospect investment firm.
About Mike Robertson
Mike Robertson is the founder and managing partner of SageLink Capital, an independent sponsor focused on investing in medium-sized, growing businesses that partners with founders, CEOs and entrepreneurs to grow their software, technology-enabled service and business service companies through purposeful investments. The firm aims to partner with current owners to monetize the value they have created and provide capital for growth initiatives and add-on acquisitions. SageLink's investments are for the long term and focus on growth. Robertson leads all investment activities at the firm, including new platform investments and add-on acquisitions for recruiting SaaS portfolio company Top Echelon/CATS Software, where he also sits on the board of directors.
Having served as the CEO of human resources SaaS leader EfficientHire and steering investments with dozens of growing technology companies as an investor and adviser with Accel-KKR, Piper Jaffray and Lehman Brothers, Robertson knows what truly drives value creation, durability and company legacy — and it's not branded capital or spreadsheet financial engineering. It's product-market fit and how well a company delivers and multiplies value for all its stakeholders — customers, partners, vendors, employees and shareholders — with a particular emphasis on customers.
Robertson has supplied investment capital for technology and service leaders across the United States and around the world, including Top Echelon/CATS Software, PageUp People, EfficientHire, Infinisource/iSolved, LogMeIn, Ancestry.com, Paymentus, Opera Solutions, North Plains, Accellos/HighJump, YourEncore, People Media, Narus and Telvent. In addition to his extensive investment and executive experience, Robertson is a trained business coach.
He received an MBA from the Stanford Graduate School of Business. He also earned a Master of Science in finance from the University of Utah and Bachelor of Science in finance from Brigham Young University, where he was the program's top graduate.
Most importantly, Robertson finds his most enduring fulfillment from his family. Nestled in the Rocky Mountains where they're never too far from a Little League diamond or soccer field, he and his wife, Candace, are raising three active little boys and one sweet little girl.